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Posted: Friday, August 19, 2011 2:45 am
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The Standard is Poor
By Basil Wilson
Standard and Poor on August 5, 2011 downgraded the United States bond rating from triple A to double A+ for the first time in United States history. At the beginning of the twentieth century, the U.S.A. superseded Britain as the dominant economy in the world system. After World War 1, Britain became a debtor nation. After World War 11, America was the world’s financier and the Marshall Plan was instrumental in the resuscitation of European economies ravished by war. As we enter the second decade of the twenty-first century, the United States finds itself as a debtor nation and the Chinese have emerged as the leading creditor nation in the world. The twentieth century was the American century. The twenty-first is looking more like it will become the Chinese century.
Standard and Poor downgraded America’s credit rating because of the illogical and absurd debate that was held in the United States Congress to raise the debt ceiling. The decision to raise the debt ceiling was arrived at the eleventh hour with a compromise that failed to convince the standard bearers at Standard and Poor that the United States government has the wherewithal to tackle effectively its debt crisis.
Standard and Poor stated declaratively that they were disturbed that elected members of the House of Representatives and the Senate were advocating for the United States to default on its debt. The rating agency is convinced that the dysfunctionality in American politics will make it unlikely for America to chisel out a consensus vis-a-vis the long term debt of the United States.
No other elected official personifies this dysfunctionality than the Congresswomen and Republican Presidential candidates, Michele Bachmann. Michele Bachmann won the Iowa straw poll in Ames and demonstrated her appeal to a segment of the American electorate that is divorced from realpolitic. The backward Bachmann insisted during and after the Congressional debate that the debt ceiling should not be lifted and there were enough resources in the U.S. treasury to prioritize and pay the essential bills and thus force America apocalyptically to live within its means.
In the 2008 Presidential election, John McCain in a desperate appeal to the fundamentalist in the Republican Party, he selected Sarah Palin as his Vice President running mate. At the outset, even before the Katie Couric interview, it was clear that Palin was a political novice, poorly educated, and completely out of her depth. She knew nothing about public policy and even less about foreign policy. Her expertise in the latter was that Alaska was juxtaposed alongside Russia. Yet the born again fringe flocked to Palin. Palin’s standing nationally has fallen since the 2008 election but among the Party faithful she is still the goddess who walks on water.
Bachmann is the second coming of Sarah Palin, with more advanced educational credentials and more advanced foolhardiness. Prior to announcing her presidential candidacy, Bachmann became known for her outrageous utterances. She has argued that the Obama administration was a gangster government yet failed to provide any data to support such extreme accusations.
Since she belongs to the school of strict constitutionalism, she has tried to make the case that the founding fathers fought against slavery and offered John Adams as an example. Adams was not a founding father and was eight years at the founding of the Republic. Despite Bachmann’s attempts to remake history, historians have widely documented that the founding fathers, including George Washington and Thomas Jefferson were vested in the slave system.
Bachmann shows the same born again illogic in response to journalists who queried about her position on craving for default. She has emphatically insisted that her position was the correct one even though Standard and Poor cited her kind of recklessness for the reason for the downgrade. Bachmann insists that the downgrade is a justification for her position that Standard and Poor was telling the country that it is already bankrupt. Bachmann’s further rationale is that is what the American people want as if the American people were homogeneous on the issue. Despite Bachmann’s fecklessness, investors have continued to buy bonds and to manifest faith in the U.S. ability to pay accumulated debt.
In this new age of political faith healers, one can speak in tongues and not be run out of town. Forty percent of the Federal budget is currently financed by treasury bonds. Sixty percent of the Federal Budget is comprised on Defense, Medicare and Social Security. Irrespective of the prioritization of the Obama administration, the governmental system of the United States would collapse if there isn’t continued access to national and international capital. There cannot be any apocalyptic changes in the United States’ dependency on borrowing. That weaning has got to be a gradual process and additional revenues will be necessary to reduce the Federal deficit and to take control of the $14.3 trillion accumulated debt.
The Bachmann’s of the world do not have any trained economist who recommends her destructive course of action. What an economist like Paul Krugman of Princeton University has been arguing is that currently the debt is manageable but what is most pressing at this juncture is getting Americans back to work. A pre-occupation with spending cuts will not only exacerbate the unemployment situation, it will force the economy into a double-dip recession. The private sector will not hire new workers until consumer demand picks up and this is where government policy is critical for the sustainability of the economic recovery.
The Bachmann’s of the world have no understanding of capitalist production. Obama himself keeps making the same mistake. Tax credits do not move investors. It is the purchasing power of consumers that has the most profound impact on the market. The most effective way of increasing consumption is to sizeably reduce the unemployment numbers. Modern capitalism needs close cooperation among capital, labor and the state sector to achieve maximum efficacy.
The United States is now a debtor nation. If it is to reclaim its central position in the world economy, the U.S. electorate will have to gravitate to enlightened political leadership. The Bachmann’s of the world, as Standard and Poor has noted, is leading the country into a path of apocalyptic destructiveness. The new Congressional Super-Committee of Twelve will only get a handle on long term debt and entitlements if it shows imagination in ending tax loopholes and eliminating the Bush tax cuts. As Warren Buffet recently stated in an op-ed in the New York Times, it is time to begin the redistribution of some of America’s wealth.
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